The best indicator for S&P 500 (SPY)
We backtested 20 indicators across daily, weekly and hourly charts on real S&P 500 (SPY) history. Here's what actually worked — risk-adjusted, out-of-sample, with costs.
Donchian Midline
On the weekly chart, this is the strongest risk-adjusted edge we found for S&P 500 (SPY) over ~33.5 years — trailing buy-and-hold by 2.2% CAGR.
The winner on each chart
Every indicator, ranked
Ranked by Sharpe (risk-adjusted return). Hypothetical, fees included.
| # | Indicator | TF | CAGR | Sharpe | Max DD | Win | Trades | vs B&H |
|---|---|---|---|---|---|---|---|---|
| 1 | Donchian Midline ✓ | Weekly | 8.5% | 0.75 | -42.4% | 57.5% | 73 | -2.2% |
| 2 | SMA 50/200 Cross ✓ | Daily | 9.6% | 0.74 | -33.7% | 68.8% | 16 | -1.2% |
| 3 | EMA 50/200 Cross ✓ | Daily | 9.1% | 0.7 | -34.0% | 66.7% | 15 | -1.7% |
| 4 | EMA 50/200 Cross ✓ | 1-Hour | 15.7% | 1.58 | -6.5% | 45.5% | 11 | -3.9% |
| 5 | RSI Trend (>50) ✓ | Weekly | 7.2% | 0.67 | -41.9% | 58.8% | 80 | -3.6% |
| 6 | EMA 20/50 Cross ✓ | Daily | 7.3% | 0.66 | -38.6% | 52.2% | 67 | -3.5% |
| 7 | Donchian Breakout ✓ | Weekly | 6.4% | 0.63 | -26.0% | 60.7% | 28 | -4.4% |
| 8 | Rate of Change ✓ | Weekly | 6.5% | 0.62 | -43.3% | 57.5% | 87 | -4.3% |
| 9 | EMA 20/50 Cross ✓ | 1-Hour | 9.0% | 1.01 | -12.2% | 47.8% | 46 | -10.6% |
| 10 | SMA 50/200 Cross ✓ | 1-Hour | 16.6% | 1.67 | -6.8% | 77.8% | 9 | -3.0% |
| 11 | Bollinger Breakout ✓ | Weekly | 3.7% | 0.5 | -19.0% | 53.6% | 28 | -7.0% |
| 12 | WaveTrend (8/6/4) ✓ | 1-Hour | 9.2% | 0.84 | -9.6% | 75.3% | 77 | -10.4% |
| 13 | ADX / DMI ✓ | Weekly | 3.6% | 0.48 | -19.9% | 66.7% | 45 | -7.1% |
| 14 | EMA 20/50 Cross ✓ | Weekly | 9.9% | 0.77 | -32.2% | 88.9% | 9 | -0.8% |
✓ = held up out-of-sample. Hypothetical, costs included. See methodology.
For S&P 500 (SPY), Donchian Midline on the weekly timeframe gave the best balance of return and risk in our test. It still trailed buy-and-hold on raw return — but remember: this is a hypothetical backtest of a standard rule, not a recommendation. Markets change. See the methodology and disclaimer.
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